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15 Jan 2015
Is the BoJ about to lower its inflation forecast?
FXStreet (Bali) - Bank of Japan (BOJ) Governor Kuroda, speaking at a BOJ branch managers’ meeting earlier on the day, made no reference to price levels in Japan - first tie he does in a speech to BOJ branch managers at quarterly meeting -, with talk mounting that the Central Bank will soon revise its forecast lower given global deflationary trends.
Talk is that the likelihood of a downward revision in consumer prices forced Kuroda to stay on the sidelines and not providing his view on CPI prospects today. The market still expects BoJ to telegraph additional easing further down the road, however, no explicit comments on lower CPI expectations were made, allowing the market some time to re-position on its Yen bear positions at better levels; USD/JPY tested 116.10 on Wed, before the down-cycle found a temporary bottom, currently at 117.70.
There is a general sense that the plunge in Oil prices will make BoJ's inflation mandate hard if not impossible to achieve within the time period previously stipulated, thus the possibility of further easing not being totally unexpected as a policy tool to deploy, again, later this year. As the economy and prices outlook stand though, the BOJ currently has shown no signs of embarking on more easing near term.
Kuroda headlines, via Reuters, included:
Japan’s economy continues to recover moderately as a trend
BOJ’s QQE programme exerting its intended effects on economy
BOJ will maintain QQE for as long as necessary to stably achieve 2 pct inflation
BOJ will adjust policy as needed, looking at upside, downside risks to economy, prices
Talk is that the likelihood of a downward revision in consumer prices forced Kuroda to stay on the sidelines and not providing his view on CPI prospects today. The market still expects BoJ to telegraph additional easing further down the road, however, no explicit comments on lower CPI expectations were made, allowing the market some time to re-position on its Yen bear positions at better levels; USD/JPY tested 116.10 on Wed, before the down-cycle found a temporary bottom, currently at 117.70.
There is a general sense that the plunge in Oil prices will make BoJ's inflation mandate hard if not impossible to achieve within the time period previously stipulated, thus the possibility of further easing not being totally unexpected as a policy tool to deploy, again, later this year. As the economy and prices outlook stand though, the BOJ currently has shown no signs of embarking on more easing near term.
Kuroda headlines, via Reuters, included:
Japan’s economy continues to recover moderately as a trend
BOJ’s QQE programme exerting its intended effects on economy
BOJ will maintain QQE for as long as necessary to stably achieve 2 pct inflation
BOJ will adjust policy as needed, looking at upside, downside risks to economy, prices